SEC Suspends Trading of XBT Provider Instruments
On Sunday, September 9, the U.S. Securities and Exchange Commission (SEC) issued an “Order of Suspension of Trading” for two exchange-traded products issued by XBT Provider AB (publ), a Swedish company headquartered in Stockholm.
The Commission states that “there is a lack of current, consistent and accurate information” concerning Bitcoin Tracker One (CXBTF) and Ether Tracker One (CETHF), “resulting in confusion amongst market participants regarding these financial instruments.” The products track the prices of their respective cryptocurrency.
Noting that both instruments are listed and traded on the Nasdaq/OMX in Stockholm and have recently been quoted on OTC Link operated by OTC Markets Group Inc., the SEC added:
The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above quoted company.
Pursuant to Section 12(k) of the Securities Exchange Act of 1934, trading in the two securities “is suspended for the period from 5:30 p.m. EDT on September 9, 2018, through 11:59 p.m. EDT on September 20, 2018,” the agency detailed.
ETF, ETN, or Non-Equity Linked Certificate?
The SEC proceeded to explain the inconsistencies of how the two products are categorized, elaborating:
The broker-dealer application materials submitted to enable the offer and sale of these financial products in the United States, as well as certain trading websites, characterize them as ‘Exchange Traded Funds (ETF)’.
The agency defines ETFs as registered investment companies that offer investors a way to pool their money in a fund that invests in stocks, bonds, or other assets. In return, investors receive an interest in the fund.
However, the Commission pointed out that “Other public sources characterize the instruments as ‘Exchange Traded Notes (ETN)’.” Unlike ETFs, these notes are unsecured debt obligations of financial institutions that trade on a securities exchange. “ETN payment terms are linked to the performance of a reference index or benchmark, representing the ETN’s investment objective,” the agency describes.
According to the SEC:
ETNs are often confused with exchange-traded funds (ETFs). ETNs and ETFs are both traded on a securities exchange and can be bought and sold throughout the day, but there are important differences.
To complicate the matter further, the Commission noted that “the issuer characterizes them in its offering materials as ‘non-equity linked certificates’,” which XBT Provider says “are not principal protected” and “do not bear interest.”
In addition to Bitcoin Tracker One and Ether Tracker One, the company has two more products: Bitcoin Tracker Euro and Ether Tracker Euro.
What do you think of the SEC suspending trading of XBT Provider instruments? Let us know in the comments section below.